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Disclosure in auditor’s report explanatory

Independent Auditor’s Report

 

To the Members of,

Alkem Laboratories Limited

 

Report on the Financial Statements:

We have audited the accompanying financial statements of Alkem Laboratories Limited (‘the Company’) which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. 

 

Management’s Responsibility for the financial statements:

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India including Accounting Standards referred to in sub–section (3C) of Section 211 of the Companies Act, 1956 (‘the Act’) read with General Circular 15/2013 dated 13th September,2013 of the ministry of Corporate Affairs in respect of Section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.    

 

Auditor’s Responsibility:

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s Internal Control . An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a base for our audit opinion.

 

Opinion:

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

 

(i)    In the case of the Balance Sheet, of the state of affairs of the Company as at      31st   March, 2014;

 

(ii)  In the case of the Statement of Profit and Loss, of the Profit for the year ended on that date; and

 

(iii) In the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date.

 

Report on Other Legal and Regulatory Requirements:

 

1.        As required by the Companies (Auditors’ Report) Order, 2003 (‘the Order’), as amended, issued by the Central Government of India in terms of sub–section (4A) of Section 227 of the Act, we give in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the order.

 

2.        As required by Section 227 (3) of the Act, we report that:

 

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

 

b. In  our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

 

c.    The Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

 

d.   In our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement comply with the Accounting Standards referred to in sub–section (3C) of Section 211 of the Act  read with General Circular 15/2013 dated 13th September,2013 of the ministry of Corporate Affairs in respect of Section 133 of the Companies Act,2013; 

 

e.   On the basis of the written representations received from the directors as on 31st March, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014, from being appointed as a director in terms of clause (g) of sub–section (1) of Section 274 of the Act.

 

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

Registration No. 109094W

 

SD/–R.S.SANGHAI

Partner

Membership No.: 036931

Mumbai: 7th July, 2014                                                           


     Annexure to the Independent Auditors’ Report:

 

Re:  Alkem Laboratories Limited (Referred to in Paragraph 1 under the heading of “Report on Other Legal and Regulatory Requirements” of our Report of even date)

 

1.      In respect of its fixed assets:

 

     (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets on the basis of available information.

                                                                                 

     (b)  As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its fixed assets. According to the information and explanations given to us, no material discrepancies have been noticed on such verification.

 

     (c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.  

 

2.      In respect of its inventories:

 

      (a) As explained to us, the inventories (excluding goods–in–transit) have been physically verified by the management at reasonable regular intervals during the year. In respect of inventories which are not physically verified being goods in transit, they are not material. In our opinion, the frequency of verification is reasonable.

 

      (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate considering the size of the Company and the nature of its business.

 

      (c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancy noticed on physical verification of inventories as compared to the book records.

 

3.        In respect of the loans, secured or unsecured, granted or taken by the Company to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956:

 

(a)   The Company has granted loans to its eight subsidiaries covered in the register maintained under Section 301 of the Act. The maximum amount outstanding at any time during the year was Rs. 12444.72 lakhs and the year end balances of such loan amounted to Rs. 8580.26 lakhs. Other than above, the Company has not granted any loan, secured or unsecured, to Companies, Firms or parties covered in the register maintained under Section 301 of Act.

 

(b)   In our opinion, the rate of interest and other terms and conditions on which these loans have been granted to the subsidiaries covered in the register maintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company.

 

(c)   The Company is regular in receipt of interest and principal amount of unsecured loans wherever applicable and there is no default.   

 

(d)   There are no overdue amounts of more than Rupees One Lakh in respect of the loans granted to the subsidiaries listed in the register maintained under Section 301 of the Act.        

 

(e) The Company has taken unsecured loans from 31 parties covered in the register maintained under Section 301 of the Companies Act, 1956 being directors, their relatives and subsidiary company. The aggregate of the year end balances of such loans is Rs. 7042.48 Lakhs and the maximum amount involved during the year was Rs. 7414.07 Lakhs from these parties.

 

(f)  The rate of interest, wherever applicable and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

 

(g) The Company is regular in repayment of interest and principal amount of unsecured loans wherever applicable and there is no default.    

 

      4. In our opinion, and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories are for the Company’s specialized requirements and similarly certain goods sold are for the specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and also for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

 

5.      In respect of the contracts or arrangements referred to in Section 301 of the Companies Act, 1956:

 

      (a) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

     

      (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements referred to in point (a) above and exceeding the value of Rs. 5 lakhs with any party during the year, have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the Company as mentioned in paragraph 4 hereinabove. However, on the basis of the information and explanation provided the same appears to be reasonable. 

 

 6. The Company has not invited any deposit from public as such but has accepted unsecured loans from its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. In our opinion, and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India, the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits so accepted, to the extent applicable. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company.

 

7.  In our opinion, the Company has an internal audit system being carried out by the firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

 

8.      We have broadly reviewed, the books of accounts and records maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub–section (1) of Section 209 of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

 

9.      In respect of statutory dues:

 

(a)   According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the Company examined by us, no undisputed amount is payable in respect of provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess which were outstanding as on 31st March, 2014 for a period of more than six months from the date they became payable.  

   

      (b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues on account of customs duty, wealth–tax, service–tax and cess which have not been deposited on account of any dispute. The particulars of dues of sales tax, excise duty and income tax as at 31st March, 2014 which have not been deposited on account of dispute, are as under:

 

Name of the Statute

Nature of Dues

Amount Rupees

(In Lakhs)

Period to which the amount relates

Forum where dispute is pending

Central Excise Act, 1944

Excise Duty

37.24

2002 to 2005

Additional Commissioner of Central Excise

Excise Duty

 

44.73

2007 to 2012

 

Additional Commissioner of Central Excise

Excise Duty
Penalty

63.10
2.13

2006 to 2011
2010 to 2011

Commissioner of Central Excise (Appeals)

Excise Duty
Penalty

149.25
234.45


2003 to 2011

Central Excise & Service Tax Appellate Tribunal

Excise Duty

12.12

2005 to 2012

Deputy Commissioner of Central Excise

Maharashtra VAT Act, 2002

Value Added Tax

 

50.78

 

2003–04

 

Deputy Commissioner of Sales Tax (Appeals)

Maharashtra VAT Act, 2002

Value Added Tax

56.54

 

2004–05

Joint Commissioner of Sales Tax (Appeals)

 

West Bengal VAT Act, 2003

Value Added Tax

8.75

3.37

2006–2007

2007–2008

Additional Commissioner of Commercial Taxes (Appeal)

Uttar Pradesh VAT Act, 2008

Value Added Tax

31.38

2012–2013

Additional Commissioner of Commercial Taxes (Appeal)

Bihar VAT Act, 2005

Value Added Tax

38.49

62.99

2010–2011

2011–2012

Joint Commissioner of Commercial Taxes (Appeals)

Income Tax Act, 1961

Income Tax

8.89

45.01

2008–09

2009–10

Commissioner of Income Tax (Appeal)

 In our opinion and according to the information and explanations given to us, the Company does not have any accumulated losses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year.

 In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The Company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet date.

 In our opinion and according to the explanations given to us and based on the information available, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.

 The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

 In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in shares, securities, debentures and other investments as such. However, the Company has made certain investments in shares, securities, debentures, bonds and/or mutual funds for which proper records are maintained in respect of transactions and contracts and timely entries have been made therein. All investments are held by the Company in its own name.   

 The Company has given guarantee for loan taken by one of its subsidiary company from the banks. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to the interest of the Company.  

 In our opinion and according to the information and explanations given to us, the external commercial borrowing (ECB) loan taken be the Company, which is in the nature of term loan, has been applied for the purpose for which it was raised. 

 According to the cash–flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments.

 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

 The Company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

 The Company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have been informed of such case by the management.                           

   

For R.S.SANGHAI & ASSOCIATES

Chartered Accountants

           Registration No. 109094W

 

            SD/–

       R.S.SANGHAI 

      Partner

      Membership No.: 036931

      Mumbai: 7th July, 2014

Disclosure in auditors report relating to fixed assets

The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets on the basis of available information. (b) As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its fixed assets. According to the information and explanations given to us, no material discrepancies have been noticed on such verification. (c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

Disclosure relating to quantitative details of fixed assets

The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets on the basis of available information.

Disclosure relating to physical verification and material discrepancies of fixed assets

As explained to us, certain items of fixed assets have been physically verified by the management during the year, and there is a regular program of verification in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and the nature of its fixed assets. According to the information and explanations given to us, no material discrepancies have been noticed on such verification.

Disclosure relating to fixed assets disposed off

The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

Disclosure in auditors report relating to inventories

In respect of its inventories: (a) As explained to us, the inventories (excluding goods–in–transit) have been physically verified by the management at reasonable regular intervals during the year. In respect of inventories which are not physically verified being goods in transit, they are not material. In our opinion, the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate considering the size of the Company and the nature of its business. (c) The Company has maintained proper records of inventories. As explained to us, there was no material discrepancy noticed on physical verification of inventories as compared to the book records

Disclosure of physical verification of inventories at fixed intervals

As explained to us, the inventories (excluding goods–in–transit) have been physically verified by the management at reasonable regular intervals during the year. In respect of inventories which are not physically verified being goods in transit, they are not material. In our opinion, the frequency of verification is reasonable.

Disclosure in auditors report relating to preferential allotment of shares

The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956 during the year and therefore the requirements of clause (xviii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year

Disclosure in auditors report relating to securities created against debentures issued

The Company has not issued any secured debentures and therefore the requirements of clause (xix) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

Disclosure in auditors report relating to any material fraud reported during period

During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have been informed of such case by the management

Disclosure in auditors report relating to purpose and end use of money raised through public issues

The Company has not raised any money by public issues during the year and therefore the requirements of clause (xx) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year

Disclosure in auditors report relating to default in repayment of financial dues

In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to any bank or any debenture holder during the year. The Company has not taken any financial assistance from any financial institution and does not have any debenture outstanding as on the balance sheet date.

Disclosure in auditors report relating to loans and advances granted by way of pledge of shares debentures and other securities

In our opinion and according to the explanations given to us and based on the information available, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities

Disclosure in auditors report relating to provisions under special statute

The provisions of any special statute applicable to a chit fund / nidhi / mutual benefit fund / societies are not applicable to the Company and therefore the requirements of clause (xiii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company for the current year.

Disclosure in auditors report relating to guarantee given

The Company has given guarantee for loan taken by one of its subsidiary company from the banks. According to the information and explanations given to us, we are of the opinion that the terms and conditions thereof are not prima facie prejudicial to the interest of the Company.

Disclosure in auditors report relating to term loans used for purpose other than for purpose they were raised

In our opinion and according to the information and explanations given to us, the external commercial borrowing (ECB) loan taken be the Company, which is in the nature of term loan, has been applied for the purpose for which it was raised.

Disclosure in auditors report relating to nature and amount of fund raised for short–term has been used for long–term or vice versa

According to the cash–flow statement and other records examined by us and the information and explanations given to us on an overall basis, we are of the opinion that there is no direct utilization of the funds raised on a short term basis during the year for long term investments.

Disclosure in auditors report relating to companies internal audit system

In our opinion, the Company has an internal audit system being carried out by the firms of Chartered Accountants and also by its own internal audit department during the year, which in our opinion is commensurate with its size and the nature of its business.

Disclosure in auditors report relating to maintenance of cost records

We have broadly reviewed, the books of accounts and records maintained by the Company in respect of the products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub–section (1) of Section 209 of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determine whether they are accurate or complete.

Disclosure in auditors report relating to statutory dues

In respect of statutory dues: (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the Company examined by us, no undisputed amount is payable in respect of provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess which were outstanding as on 31st March, 2014 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues on account of customs duty, wealth–tax, service–tax and cess which have not been deposited on account of any dispute. The particulars of dues of sales tax, excise duty and income tax as at 31st March, 2014 which have not been deposited on account of dispute, are as mentioned in notes

Disclosure relating to regularity in payment of undisputed statutory dues

(a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess and other material statutory dues during the year as applicable with the appropriate authorities in India. According to the information and explanations given to us and the records of the Company examined by us, no undisputed amount is payable in respect of provident fund, employees’ state insurance, income–tax, sales–tax, service–tax, wealth tax, custom duty, excise duty, cess which were outstanding as on 31st March, 2014 for a period of more than six months from the date they became payable.

Disclosure relating to disputed statutory dues

According to the information and explanations given to us and the records of the Company examined by us, there are no dues on account of customs duty, wealth–tax, service–tax and cess which have not been deposited on account of any dispute. The particulars of dues of sales tax, excise duty and income tax as at 31st March, 2014 which have not been deposited on account of dispute, are as mentioned in notes

Disclosure in auditors report relating to accumulated losses

In our opinion and according to the information and explanations given to us, the Company does not have any accumulated losses as at the end of the financial year and has not incurred any cash loss in the financial year ended on that date or in the immediately preceding financial year.

Disclosure regarding terms of recovery of loans granted or taken

(c) The Company is regular in receipt of interest and principal amount of unsecured loans wherever applicable and there is no default. The Company is regular in repayment of interest and principal amount of unsecured loans wherever applicable and there is no default.

Disclosure in auditors report relating to internal control system

In our opinion, and according to the information and explanations given to us and having regard to the explanation that purchases of certain items of inventories are for the Company’s specialized requirements and similarly certain goods sold are for the specialized requirements of the buyers and suitable alternative sources are not available to obtain comparable quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and also for sale of goods and services. Further, on the basis of our examination of the books and records of the Company, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control procedures.

Disclosure in auditors report relating to contracts and arrangements under section 301 of companies act

Companies Act, 1956: (a) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements referred to in point (a) above and exceeding the value of Rs. 5 lakhs with any party during the year, have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the Company as mentioned in paragraph 4 hereinabove. However, on the basis of the information and explanation provided the same appears to be reasonable.

Disclosure relating to presence of register for necessary transactions

In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements, that needed to be entered into a register in pursuance of Section 301 of the Companies Act, 1956, have been so entered.

Disclosure relating to reasonability of transactions

In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements referred to in point (a) above and exceeding the value of Rs. 5 lakhs with any party during the year, have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, except that reasonableness could not be ascertained where comparable quotations are not available having regards to the specialized nature of some of the transactions of the Company as mentioned in paragraph 4 hereinabove. However, on the basis of the information and explanation provided the same appears to be reasonable.

Disclosure in auditors report relating to deposits accepted from public

The Company has not invited any deposit from public as such but has accepted unsecured loans from its directors, shareholders and their relatives and also trade deposits from stockiest and agents which are in the nature of deposits defined under the provisions of section 58A and 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. In our opinion, and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India, the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits so accepted, to the extent applicable. We are informed by the management that no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, relevant to sections 58A, 58AA or other relevant provisions of the Act upon the Company.

Disclosure of procedure followed for physical verification of inventories

In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management are reasonable and adequate considering the size of the Company and the nature of its business.

Disclosure about maintenance of inventory records and material discrepancies

The Company has maintained proper records of inventories. As explained to us, there was no material discrepancy noticed on physical verification of inventories as compared to the book records.

Disclosure in auditors report relating to loans

In respect of the loans, secured or unsecured, granted or taken by the Company to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956: (a) The Company has granted loans to its eight subsidiaries covered in the register maintained under Section 301 of the Act. The maximum amount outstanding at any time during the year was Rs. 12444.72 lakhs and the year end balances of such loan amounted to Rs. 8580.26 lakhs. Other than above, the Company has not granted any loan, secured or unsecured, to Companies, Firms or parties covered in the register maintained under Section 301 of Act. (b) In our opinion, the rate of interest and other terms and conditions on which these loans have been granted to the subsidiaries covered in the register maintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company. (c) The Company is regular in receipt of interest and principal amount of unsecured loans wherever applicable and there is no default. (d) There are no overdue amounts of more than Rupees One Lakh in respect of the loans granted to the subsidiaries listed in the register maintained under Section 301 of the Act. (e) The Company has taken unsecured loans from 31 parties covered in the register maintained under Section 301 of the Companies Act, 1956 being directors, their relatives and subsidiary company. The aggregate of the year end balances of such loans is Rs. 7042.48 Lakhs and the maximum amount involved during the year was Rs. 7414.07 Lakhs from these parties. (f) The rate of interest, wherever applicable and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interest of the Company. (g) The Company is regular in repayment of interest and principal amount of unsecured loans wherever applicable and there is no default.

Disclosure about loans granted or taken by parties covered under section 301 of companies act

(a) The Company has granted loans to its eight subsidiaries covered in the register maintained under Section 301 of the Act. The maximum amount outstanding at any time during the year was Rs. 12444.72 lakhs and the year end balances of such loan amounted to Rs. 8580.26 lakhs. Other than above, the Company has not granted any loan, secured or unsecured, to Companies, Firms or parties covered in the register maintained under Section 301 of Act.

Disclosure regarding terms and conditions of loans granted or taken

The rate of interest, wherever applicable and other terms and conditions of such loans are, in our opinion, prima facie not prejudicial to the interest of the Company.

Disclosure regarding terms of payment of loans granted or taken

(d) There are no overdue amounts of more than Rupees One Lakh in respect of the loans granted to the subsidiaries listed in the register maintained under Section 301 of the Act.

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